By Michael Yoshikami, President & Chief Investment Strategist, YCMNET Advisors
The Federal Reserve this week ratcheted down their outlook for economic growth and once again the headlines blared that this recovery is turning out to be rocky and uncertain. Recent data underscores what should be obvious by now: that this recovery will be three steps forward and two steps back. Retail sales showed a surprising drop of 0.5% in June from May, a second month in a row, as consumers continued to pay off debts and rein back spending. Housing data also fell, with existing home sales for May dipping 2.2% as banks keep huge number of foreclosed properties off the market waiting for more appealing prices in the future. Farewell, v-shaped recovery it would seem.
Expectations are really the key in watching the pronouncements and assessments of so-called market experts. Anyone looking for a straight-line upward recovery trend from the latest economic numbers will indeed be surprised and somewhat disconcerted. If you are expecting an overwhelming avalanche of positive recovery news, then these latest data points are nothing short of troubling. On the flip side, for economic commentators pronouncing a doomsday scenario, it is equally disconcerting to see positive data showing up on recent industrial production reports and stronger-than-expected corporate earnings. The mixed data releases fly in the face of dogmatic views that the world is black and white; feast or famine. To some fates are sealed by sky-high deficits and wrong thinking by politicians across the world. Others ignore obvious problems and pound the drum that good times are soon here again. As is usually the case, neither is right, or wrong.
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